From boom to bust: Bhiwandi’s textile industry woes

ECONOMIC POLICY AND SMALL SCALE INDUSTRY

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Idle, rusting powerlooms speak volumes about the present status of Bhiwandi's once-thriving textile industry. Pic: Aiman Chawre

Take a walk around Bhiwandi. Much of what you will see are shuttered powerloom units gathering dust and rust. During its heyday, Bhiwandi, in Thane district, had the highest cluster of powerlooms in the country, and was a huge employment hub with workers hailing from other states like Madhya Pradesh, Uttar Pradesh and Bihar.


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Today this once-thriving business is facing extinction, thanks to GST, demonetisation and cheaper competition, rendering thousands of workers jobless.  “More than half the karigars (workers) have returned to their native place as major textile units have shut down,” said Dilshad Sayyed Ahmed Ansari, who has been working as labourer in the powerloom sector for the past 15 years. Dilshad, who hails from Bhiwandi, had to find work in a gas supply company for a while, when the textile firm he was working for shut down.

Now, Dilshad has again found employment in a powerloom unit, but is unsure this will last as more powerloom units are shutting down due to a variety of reasons. Like that of Rufi Hijimiyan, whose father had set up a powerloom unit before independence, with Rufi taking over in 1982 but having to shut it down in 2016.

“In 2016, the market was flooded with ordinary cloth,” Rufi explained. “The production of cloth was thrice its usual demand as automatic loom owners who used to make fancy cloth switched to producing plain cloth. Electricity was expensive and there were labour problems. Yarn price fluctuation used to affect the business as the selling price was below production cost. My company incurred huge losses. I bore the losses for one and half years, but in the end, I had no choice but to shut the business down.”  More than twenty families depended directly, and five families indirectly, on Hajimiyan’s unit for their livelihood.

Arshad Ansari, who operates his business through rented looms, however, is starting to make a profit as rental cost for powerlooms has declined because of the steep fall in demand.  “Rental for loom was 15,000-16000 in 2013” said Arshad. “Now looms are available for rent at Rs 10000-11000”. But even the few looms that are still operating are working at 40-45 per cent capacity, according to local activist Punit Khimasia.

Ancillary businesses that thrived on the earnings of the powerloom sector too have taken a big hit. For instance, the thousands of migrant workers used to depend on labour kitchens/mess for food. Bhiwandi is estimated to have 300 such kitchens catering to these labourers. The mass shut down of powerlooms is killing this business as well. “In the last few years, our business has come down by over 20 per cent,” said Naushad Usmani, owner of one such kitchen named Bagh-e-Firdaus Darbar.  Other related service businesses too are facing lean times.

Impact of GST 

The 18 per cent GST on textile products, and huge delays in getting GST refund due to them, are a prime reason for the woes of the powerloom units. “I haven’t seen any profit since 2014-15,” said Ansari Abdul Malik, owner of 78 looms of different varieties. “Taxes are high and penalties are very heavy. Also, the GST refund is inordinately delayed. We have not got any refund over the last four months. The E-way bill is another harassment. If due to any reason the goods are not transported, we have to immediately cancel it and there are time constraints in generating the E-way bill.”

“Suppliers install machinery with 18 per cent GST but this was not considered for a refund,” said chartered accountant Ramakant R Lahoti. “So this tax has to be paid by the manufacturer which reduces their cash flow drastically. The government should consider a refund of GST on machinery so that their cash flow will improve.”

Ansari also said the reduction in loan subsidy for new powerloom units from 30 per cent to 10 per cent has made the business unviable. “Moreover, people who bought looms when subsidy was 30 per cent have not received this subsidy even after five years. This has forced some of them to sell their looms to ensure they have adequate capital”.

Another problem is high export duty on their products. “I met Textile commissioner Kavita Gupta and explained in detail how export duty of 25 percent is killing our business and how we are losing out to China, Pakistan, Bangladesh and Vietnam, which support export friendly policies,” said Abdul Manan Siddiqui president of Shanti Nagar Weavers Welfare Association and an active member of Bhiwandi Powerloom Association. Abdul Siddiqui even met union textile minister Smriti Irani to press the case for lower export duty. “I was assured that soon there will be a positive change in export duty but nothing has changed yet. The government is focusing on big players like Reliance, not us. Not a single new powerloom has been installed in Bhiwandi since 2015.”

Based on information provided by Torrent power, a private company supplying electricity in Bhiwandi, Siddique said out of 13,80,000 looms operating back then, over 4 lakhs looms have shut down out of which 2 lakh units have been sold as scrap.

Some other figures are telling on the plight of the textile industry, not just in Bhiwandi but all over. For instance, India’s cotton textiles export declined by 24.4 per cent during April-July 2019. Data for the first three weeks of August 2019 also show a 25 per cent decline in export continuing on a month on month basis (according to Pg. no.4, TEXPROCIL E-NEWSLETTER Sept 14, 2019). At the same time, the proposed budget for the textile sector (which employed 51 million people directly and 68 million people indirectly according to a 2015-2016 Assocham report) for fiscal year 2019-20 is 5831.48 crore,16.01 percent lower than the previous year’s budget of 6943.26 crore

High cost of electricity

Another cost escalator is electricity, which in Maharashtra is among the most expensive in comparison to other states. In a petition filed before the Maharashtra Electricity Regulatory Commission, Mumbai, Hiren Jayendra Nagda, a power loom owner, pointed out that “basic electricity cost to run a powerloom per month is Rs1500 to Rs1600 compared to just Rs75 per loom per month in UP.” Not surprising then that their electricity bills, among other factors, saw so many powerlooms shut shop in 2015-16

One of them was owned by Yaseen Abdul Majeed Ansari, whose ancestors migrated from Allahabad to first set up powerlooms in Bhiwandi in 1912. In June 2016, Yaseen, who owned 120 looms, was forced to shut down his unit. “Government policies were not in our favour,” said Yaseen. “Demonetisation, high power rates and high labour charges in the past 5-7 years forced my hand. Specially, electricity bills caused irreparable damage to my business in 2015-16.” Now he has switched to goat farming.

Unfortunately, Yaseen’s is not an isolated instance, but one among thousands of similar sad tales of powerloom owners falling victims of misguided government policy. That too of a government, which shouts from the roof tops that they are all for small industry. Bhiwandi’s small industries, especially the powerlooms, tell a completely different tale.

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1 Comment

  1. While it is true that demand seems to be low, the business enterprises need to be flexible enough to adjust to the changing fashion and mould themselves if they wish to continue their business. I am sure that the government understands the intricacies of the new policies and have corrected wherever necessary and the community needs to bring some of them to their notice and I have no doubt that they will be heard patiently for an amicable solution.

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